Concept based notes Macro Economics - Guru Kpo

Biyani's Think Tank

Concept based notes

Macro Economics

BA

Ms Shalini Singh

Deptt. of Arts Biyani Girls College, Jaipur

2 Published by :

Think Tanks Biyani Group of Colleges

Concept & Copyright :

Biyani Shikshan Samiti

Sector-3, Vidhyadhar Nagar, Jaipur-302 023 (Rajasthan) Ph : 0141-2338371, 2338591-95 Fax : 0141-2338007 E-mail : acad@ Website :;

Edition : 2012

While every effort is taken to avoid errors or omissions in this Publication, any mistake or omission that may have crept in is not intentional. It may be taken note of that neither the publisher nor the author will be responsible for any damage or loss of any kind arising to anyone in any manner on account of such errors and omissions.

Leaser Type Setted by : Biyani College Printing Department

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Macro Economics

3

Preface

I am glad to present this book, especially designed to serve the needs of the

students. The book has been written keeping in mind the general weakness in understanding the fundamental concepts of the topics. The book is self-explanatory and adopts the "Teach Yourself" style. It is based on question-answer pattern. The language of book is quite easy and understandable based on scientific approach.

Any further improvement in the contents of the book by making corrections, omission and inclusion is keen to be achieved based on suggestions from the readers for which the author shall be obliged.

I acknowledge special thanks to Mr. Rajeev Biyani, Chairman & Dr. Sanjay Biyani, Director (Acad.) Biyani Group of Colleges, who are the backbones and main concept provider and also have been constant source of motivation throughout this endeavour. They played an active role in coordinating the various stages of this endeavour and spearheaded the publishing work.

I look forward to receiving valuable suggestions from professors of various educational institutions, other faculty members and students for improvement of the quality of the book. The reader may feel free to send in their comments and suggestions to the under mentioned address.

Author

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4

Syllabus

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Macro Economics

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Section A Chapter 1

Basic concepts of Macroeconomics

Q1. Ans.

What is economics all about? Economics is all about satisfying unlimited wants in limited resources. Three important points to be kept in mind are: 1. Humans have unlimited wants.

2. Resources are limited.

3. Limited resources have alternative uses.

Q2. Define Economic Analysis. Ans. Economics Analysis deals with the study of how human behavior or individual

economic agents behave against problem of scarcity and react to observed changes. Two main parts of Economic: 1. Microeconomics: It is the study of individual economic agents. E.g. per capita

consumption.

2. Macroeconomics: It is the study of aggregates and overall changes in an economy.

E.g. overall price level, national output.

Q3. Ans.

Explain the origin of Macroeconomics with special emphasis on its major concerns? Economic events of the 1930s, the decade of the Great Depression, spurred a great deal of thinking about macroeconomic issues, especially unemployment. Before great depression economists applied microeconomics, they were referred to as classical models, to economy-wide problems. However the unexpected events of 1930s gave way to new line of thinking called Keynesian view based on macroeconomics. Keynes was the first economist to study macroeconomic aspect through his book `The General Theory of Employment, Interest and Money' in 1936. Keynes mainly about two important points which are as follows:

It`s the level of Aggregate Demand for goods and services that affect the

level of employment.

Government intervention is necessary to correct market inefficiencies.

1. Major Macroeconomic concerns

Inflation: prices stability is desirable. Consumer price index (CPI) is the

most commonly used measure of overall price level in an economy. CPI is

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